5 Most Common Money Mistakes

Who would pass up free money? Maybe you, if you make only the minimum contribution to your employers 401(k) savings plan  or opt out of the plan on the grounds that money is tight. According to the 2008 Wachovia Retirement Survey, only about a quarter of women with 401(k)s contribute the maximum allowed. Puny 401(k) contributions mean you arent taking full advantage of any free matching funds your company offers. Says De Baca: If your boss offered to add $25 to your weekly paycheck, would you turn it down? Of course not. Most employers match all or part of the first 3 to 6 percent of pay employees contribute.

That might not sound like much, but take a look at the math: Assume your company will kick in 50 cents for every dollar you put in, up to 5 percent of your salary. If youre 40 and making $40,000 but decide not to fund your 401(k), you could be giving up almost $230,000 over 25 years.

The fix: If money is so tight you cant imagine saving two bucks, start small. You dont have to put in the maximum $15,500 annual contribution ($20,500 if youre 50 or older). Instead, increase your contribution by 1 percent of pay a year, until you get the full match. One painless way to save: When you get your next raise, use all or part of it to bump up your 401(k) contribution.

If your employer doesnt offer a match, that doesnt mean you should skip making contributions. Remember, a 401(k) lets you put away money tax-deferred. This doesnt just lower your current tax rate; your earnings can really grow, because Uncle Sam isnt taking a bite out of them.

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